Consumers Vs. Data Science Bad Guys

Editor’s note: Levi King is the CEO and co-founder of Creditera and was previously president and co-founder of Lendio.

It’s interesting as hell that, as the world continues to spew vitriol at the creepy collection and abuse of data by governments and big businesses, big data and data science companies are still kicking ass. Fortunately for these businesses, right now governments and Facebook are the bad guys, providing super useful and convenient cover. That will change.

Consumer and small business populations continue to become more privacy-focused, thanks to noise and frustration by whistleblowers and offenders. Snowden, Facebook, government overreach and abuse, and security breaches at Home Depot, Target, and others are causing us to think twice about our data – whether the data is known or unknown (or understood).

The emergence of location-based data gathered by our mobile phone providers, social data, behavioral data, Internet of things-generated data – combined with the use and abuse thereof – represents just the small beginnings of many nasty, uncomfortable problems that will fester over time. A war is coming. The good news? Consumers will win.

We can partially predict the future by looking at the past. Over time consumers got fed up with another data vertical, one that operated in the dark, where consumers were the victims of abuse and mistakes by credit bureaus and creditors. Eventually the consumer outcry led to the passing of the Fair Credit Reporting Act (FCRA) and the Fair Debt Collections Practices Act, as well as the creation of the Consumer Finance Protection Bureau and other related legislation/agencies.

Consumer data being sold in the dark to third-party marketers led to legislation surrounding phone solicitation, lemon laws, and other consumer-centric protective legislation.

It’s only a matter of time until consumer agitation leads to new legislation or revision of existing legislation like the FCRA to extend consumer protection beyond credit data and into any type of data used in risk underwriting, marketing segmentation or consumer modeling. I also believe it’s only a matter of time until Congress wakes up and starts extending these types of consumer protections to small businesses. I constantly witness the frequent credit data mistakes that plague small businesses, causing them lost opportunities, higher costs, and difficulties in qualifying for favorable financing.

Fortunately for big data companies, the federal government has been so toxic lately that little-to-nothing has been accomplished in this new category of consumer and small business protection.

Existing companies would be smart to get ahead of this coming protective legislation apocalypse by adopting transparency now. Every business or governmental agency is viewed by consumers and small business as an advocate or adversary – there is no middle ground. Those that are early adopters of transparency will be considered advocates and will gain strong loyalty and trust from their constituents. The converse is also true, that those avoiding transparency will be labeled as adversaries, a label nearly impossible to shed.

Other companies will be founded upon the principles of transparency, and they will be richly rewarded.

It seems like almost every consumer-to-business relationship starts in an adversarial fashion nowadays. Want a PayPal account? Prove to us you aren’t a scammer. We’re always watching you. Want a loan from Wells Fargo or Lending Club? We’re going to look at tons of personal info, plus dig up tons of dirt on you. But guess what? We’re not going to share any of our findings with you.

Once the relationship is established in adversarial fashion it’s nearly impossible for the business to ever be viewed as an advocate. Does my bank really value me? If they won’t tell me what’s in the black box of underwriting, what they look at, how they crunch the numbers, and how they arrived at a decision, then how can I believe they’re my advocate?

Worst off will be the new data science companies, operating entirely in the dark, unregulated, accountable to no one, selling raw and modeled data on millions of individuals and small businesses. Imagine how invasive that will be perceived as the public comes to understand it all. They know where I spend my time, with whom I associate and what my secrets are. Then they “model” me, and then sell me over and over? The bastards. That’s the stuff that will get consumers writing to Congress.

Transparency is the path to consumer loyalty and trust. Look at companies like Credit Karma, as leaders in customer transparency and trust. Be ahead of the curve, build an outstanding business, and dominate by playing offense instead of defense in the coming privacy wars.